Across the Nation

Nevada’s Live Entertainment Tax: A Tangled Taxation Web

In 2004, Nevada’s live entertainment tax became law. On the surface, its rules seem relatively straightforward — at least, as straightforward as any tax law’s rules can be. The law involves a tangled web of exclusions, making it difficult for the average American to navigate. While lawmakers in the state consider replacing the current tax law with a simpler version, here’s a quick overview of this tax and its burden on residents, businesses, and visitors to the southwestern state.

The Live Entertainment Tax

Nevada doesn’t have state or corporate taxes, making its tax burden relatively low: 8.1 percent in 2011, or the eighth lowest in the country against a national average of 9.8 percent. What makes the Silver State significant is its consumption tax on the live entertainment industry, which is essentially an expansion of the 1965 Casino Entertainment Tax.

The Nevada Gaming Control Board and the Nevada State Department of Taxation collect the entertainment tax, along with tax revenues on gambling establishments and winnings. When the tax went into effect in 2004, state officials estimated that it would add $75 million per year to the state’s budget. In 2014, the state collected more than $154 million, according to the Nevada Resort Association.

A Mess of Exemptions

Nevada’s entertainment tax rate is based on a live event venue’s maximum occupancy. A rate of 10 percent applies to facilities whose minimum occupancy is 200 and maximum is 7,499. Admission charges, refreshments, and merchandise sold at the live event are also taxed at this rate, in addition to sales taxes and any other applicable fees.

A 5 percent rate is charged on admissions only for facilities with a maximum occupancy of 7,500 or more.

While these rates may sound simple, here are the exemptions to the tax:

Any event where all admission proceeds go to a nonprofit organization.

Live entertainment at facilities without gambling/gaming and with a maximum occupancy under 200.

Live entertainment wherein only musical performers move about the audience/venue.

Entertainment that’s only provided in the common area of a shopping mall.

Entertainment during food or product demonstrations at a shopping mall or craft show.

Live entertainment as a part of an amusement ride (but not the primary reason for the attraction).

Free entertainment provided in an outdoor area to the public.

Free entertainment provided as part of a restaurant’s ambiance.

Since the law took effect, three changes have occurred. Beginning July 1, 2005, outdoor concerts at nongaming establishments became exempt, and two years later, NASCAR races and minor league baseball games did as well.

What Might Change?

The average business owner spends an unnecessary amount of time learning how the live entertainment tax applies to them, and that time (and money) could be put to better use. Nevada’s state representatives on both sides are calling for changes to reduce the live entertainment tax’s complexity and strip out loopholes.

According to the Las Vegas Review-Journal, this involves potentially changing the tax to a luxury tax imposed on events that cost $400 to $800 a ticket, or moving toward “a single rate for an admissions tax, possibly setting it lower than the current 10 percent maximum, but broadening it to cover more events.” An overhaul of the system that eliminates the need to interpret which events constitute live entertainment should make the tax easier to impose — and follow — for all parties involved.